100 NHS trusts demand backdated business rates relief

Local government faces a bill running into hundreds of millions of pounds after more than 100 NHS trusts demanded business rates relief backdated for six years.

On Monday, many local authorities with a trust hospital in their area received a letter from ratings agents at Bilfinger GVA demanding that mandatory charitable relief should be granted on NHS property.

Affected councils now face the expense of a legal fight in an attempt to fend off the requests which, on top of the backdated refund, could leave large holes in their future financial plans.

A spokesperson for Bilfinger GVA confirmed: “Following a concern raised by an NHS trust client, we have undertaken considerable research into the application of mandatory rate relief, and have sought legal opinion on the issue.

“As a result, we have made applications for relief on behalf of a number of our NHS trust clients‎.”

One district council is understood to have calculated its backdated bill to work out at more than £9m, with a loss of income of £1.74m for 2016/17. Three more are said to be facing payments of £4m.

A spokesman for the District Councils’ Network said: “The network acknowledges, from representations made to us, some serious concerns about the potentially punitive financial impact of these appeals, which could have serious consequences on attempts by councils to drive crucial business rates growth.

“The DCN is working to understand and assess the possible scale of the situation and protect the interest of our 200 members.”

Charities can apply for relief of up to 80% if a property is used for charitable purposes.

An answer to a technical enquiry to the Institute of Revenues Rating and Valuation a few years ago concluded that NHS trusts are not entitled to relief under section 47 of the Local government Finance Act 1988. This was because trusts are not considered charitable organisations but rather public sector funded organisations with boards of directors and not trustees.

However, the letter from Bilfinger GVA received by authorities contained a barrister’s opinion that relief was applicable.

According to a source who has seen the letter: “The main part is for foundation trusts where they seem sure of charitable status.

“The second part refers to all other NHS bodies including trusts, and here the advice is not so clear cut. They are saying here that each case needs to be looked at on its own merits.”

Richard Harbord, former chief executive of Boston Borough Council, said: “To some extent this does seem a waste of resources as the two parties are both in the public sector. The decision to give relief would be good for NHS deficits but could be disastrous for local authorities.”

He added that the effect of the claim, if successful, could be exacerbated by the government’s decision to devolve business rates growth to local authorities and phase out revenue support grant.

Harbord added: “This rather underlies the concerns local authorities have about moving to the new funding regime and it increases the feeling of uncertainty.

He said: “There have already been successful claims for reductions in doctors’ surgeries, universities and academies, which are all now outside the system. The rate base seems to be shrinking even as we move to the brave new world ahead.”

Room151 understands that Department for Communities and Local Government officials are aware of the issue and are set to write to councils in the next few days.

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